Demonetisation And the End of Ashok Kumar’s ‘Achhe Din’

Ashok Kumar remembered his achhe din (golden days) clearly: As a Class 10 dropout, he had a secure job that paid him Rs 15,000 per month to haul plywood between factories in a town called India’s plywood capital. He and his wife saved Rs 4,000, and he had few complaints.

That was before November 2016, when Prime Minister Narendra Modi announced demonetisation, withdrawing 86 percent, by value, of India’s currency. “I received November’s salary in January and it was only downhill from there,” said Kumar, as he waited--dressed in an old sweater and worn slippers--in this northern Haryana town at Fawara Chowk, an open-air labour market, for an itinerant job.

Then came the Goods and Services Tax (GST)--criticised for its shoddy implementation--in July 2017, and his factory cut about 110 of 200 jobs, including Kumar’s. With no cash in circulation and a 28% GST on the manufacturing and sale of plywood, thousands who sought work here--from Uttar Pradesh, Punjab, Uttarakhand and other northern states--bore the consequences.

The plywood industry’s annual turnover dropped from Rs 16,000 crore in 2016 to Rs 12,000 crore now, said Devendra Chawla, national president of the All India Plywood Manufacturers' Association. He estimated that nearly 350 plywood manufacturing units shut down, as did 500 units supplying raw material; production at more than 100 units was halved, and thousands of unorganised sector employees lost their jobs. There are estimated to be 1,000 plywood industry units in Yamunanagar.

Kumar has a mother, wife, two sons and a daughter to support. Waiting for an employer to pick him up--he explained how his monthly employment had dwindled to between seven and 10 days and his monthly income fallen by about a third to Rs 4,000-6,000. His wife now works as domestic help, earning Rs 6,000, but that was not enough to end their “suffering”, he said.

After demonetisation, payments were delayed due to the sudden cash crisis, which brought down the industry, said Ankur Jain, owner of Mahaveer Plywood. “In the plywood industry, one has to buy wood every day. We had no funds to buy raw material, and we also could not pay for the manufacture of raw material which we had earlier purchased.”

When he first came to Fawara Chowk--”fountain square”--to find work, Kumar had to wait a week before he was hired to unload wood for Rs 300 a day. He travels 20 km each way by bus or cycle to his mud home in a slum outside town.

Kumar represents India’s failing demographic dividend--the economic growth that accrues from a large working-age population--and its crisis-ridden farms. Forced to drop out of school when his father, a farm labourer died, he found a secure government job impossible. Options for a class-10 dropout, Kumar admitted, were “limited”. India’s demographic opportunity stretches longer than any other country, from 2005-06 to 2055-56, but falling fertility rates mean the window of opportunity is closing for many states, according to a 2018 United Nations Population Fund (UNFPA) report. It has already closed for Kerala and Tamil Nadu.

“Every day while leaving home, I think of whether I will find work,” said Kumar, “Or if I will have to return home empty-handed.”

This is the ninth of an 11-part series reported from labour hubs across the country--places where unskilled and semi-skilled workers gather to seek contract jobs--to track employment in India’s informal sector. (The previous stories were from Indore, Jaipur, Perumbavoor, Ahmedabad, Kolkata, Lucknow, Bengaluru and Bathinda.)

This sector, which absorbs the country’s mass of illiterate, semi-educated and qualified-but-jobless people, employs 92% of India’s workforce, according to a 2016 International Labour Organization study that used government data.

By delving into the lives and hopes of informal workers, this series provides a reported perspective to ongoing national controversies over job losses after demonetisation and the rollout of the Goods and Services Tax in July 2017. The number of jobs declined by a third over four years to 2018, according to a survey by the All India Manufacturers’ Organisation, which polled 34,700 of its 300,000 member-units. In 2018 alone, 11 million jobs were lost, mostly in the unorganised rural sector, according to data from the CMIE.

Fawara Chowk in Yamunanagar sees about 1,500-2,000 labourers like Kumar every day. Most of these labourers, from across Haryana and neighbouring states such as Uttar Pradesh, had worked in plywood units that either retrenched workers or simply shut down. The number of workers at the hub has “doubled and tripled” since the implementation of demonetisation and GST, a labourer said.

Fawara Chowk in Yamunanagar sees about 1,500-2,000 labourers every day. Most of these labourers, from across Haryana and neighbouring states such as Uttar Pradesh, had worked in plywood units that either retrenched workers or simply shut down.

The labour hub wakes up earlier than other parts of the city. Around 6 a.m., workers start trickling in--the earlier they arrive, the higher the chances of finding work, we were told. The chowk is situated at the heart of the city, with roads connecting to the Yamunanagar bus depot and Jagadhri railway station. Several shops selling cosmetics and clothes, mostly knock-off brands, and other knick-knacks, dot the area. The narrow lanes are filled with bicycles, tongas(horse-carts) and scooters.

Workers standing in small groups looked up expectantly at every passing truck or rickshaw. Finally a contractor arrived and started sizing up the workers who surrounded him: the younger, the better. Those who do get recruited earn around Rs 300 a day for jobs in construction, painting, loading/unloading of wood and similar jobs. Before demonetisation, workers here used to get paid around Rs 500-Rs 600 a day, we were told.

Sundar Lal, 45, used to earn around Rs 12,000 at a plywood manufacturing unit till it was hit by demonetisation. He earns less than half now--Rs 4,000-Rs 5,000--as a daily wage labourer.

Sundar Lal, 45, used to earn around Rs 12,000 at a plywood manufacturing unit till it was hit by demonetisation. He earns less than half now--Rs 4,000-Rs 5,000--as a daily wage labourer.

Lal, a Class-5 dropout in a kurta-pajama and tattered slippers, deals with a tough daily commute to the chowk. His home is in Sarsawa in Uttar Pradesh’s Saharanpur district, a hut in a slum settlement 28 km away. He takes a bus to the labour hub, and a one-way ticket costs him Rs 25. And he is not lucky everyday. The best he can hope for is 10-12 days of work a month at a daily wage of Rs 250-300, half what he used to earn once.

The five-member Lal family is struggling to stay afloat--just water and electricity bills total up to Rs 200. Lal’s wife works as a farm labourer and earns just Rs 2,000-Rs 3,000 a month. Their two daughters take care of the household while their son works at a tea shop where he earns Rs 3,000 a month.

Lal said he has “no choice” but to agree to low wages because the labour market is full of desperate workers willing to settle for the same or even less. “How will my family survive if I don’t work at low wages?” he asked. On most days, unable to afford vegetables or dal (lentils), the family has roti with just salt.

Promise of Jobs Did Not Materialize

Haryana will elect a new state government in October 2019. In the 2014 state assembly elections, the Bharatiya Janata Party (BJP) under Manohar Lal Khattar’s leadership won 47 of the 80 assembly seats, defeating the Congress led by Bhupinder Singh Hooda and the Indian National Lok Dal led by Om Prakash Chautala.

In a state plagued by a job crisis and farmer distress, the BJP had released a manifesto that appealed to all sections of society. It had guaranteed the youth 100 days of work, a monthly stipend of Rs 6,000 for Class 12 graduates and of Rs 9,000 for college graduates. The party had also promised loans of up to Rs 1 crore to those wishing to set up new businesses and a minimum wage of Rs 300.

But an RTI reply revealed that of the 1,521,854 youths who registered under various employment programmes in 2014-2018, only 647 (0.042%) had found a job. The applicants were mostly from districts like Jind, Faridabad, Rohtak and Yamunanagar.

Haryana’s unemployment rate is the third highest in the country, at 19%, behind only Chandigarh (22.7%) and Tripura (22.9%), showed data provided by the Centre for Monitoring Indian Economy, as of March 2019. In October 2016--a month before demonetisation was announced--the unemployment rate was 9.8%, and this rose to 15.4% in December 2016. A year later, in October 2017, the unemployment rate rose to 14.3% and went even higher in October 2018, to 18.7%. December 2018 recorded an unemployment rate of 24.5%, the highest yet since January 2016.

“It will not be wrong to say unskilled labourers work like bonded workers,” said PP Kapoor, an RTI activist who has been working independently for labour rights in the state. He traced the problem to “faulty” government policies and the lack of attention to workers’ welfare. Workers were not getting minimum wages, not being paid regularly, were deprived of good medical facilities and were offered no options for rehabilitation in the event of job loss.

Nayeb Singh Saini, Haryana’s labour minister, denied these charges. “The government has been working continuously for the welfare and social security of labourers,” he told IndiaSpend.

Schemes had been implemented to ensure worker welfare, he said, pointing out that more youngsters have been brought into the job-guarantee programme under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS); there is compensation for workers in case of death; health insurance for workers and their dependents and free health services to families living below the poverty line. The minimum wage, too, had been increased regularly, he pointed out--between January and June 2017 it was Rs 318.46 for an unskilled worker and this was increased to Rs 339.51 by January to June 2019. (Minimum wages are fixed for six-month periods.)

Under the Haryana Building and Other Construction Workers (BOCW) board, workers are entitled to benefits such as pension for those above 60, loans for home construction, insurance for labourers and their immediate dependents, maternity benefits, financial assistance for children’s education and so on. As of September 2018, 776,000 workers has registered under this scheme. However, the number of beneficiaries is unclear.

Data on the MGNREGS website, as of April 27, 2019, showed that of the 1.6 million workers registered, only 638,000 (40%) are currently active. The average number of employment days provided per household in the financial year 2018-2019 was 33.73, against the 100 guaranteed. And the average daily wage was Rs 281.27, 17.51% less than the minimum wage prescribed by the state.

At Fawara Chowk, all that workers want is for the government, any government, to create jobs across various industries and raise/standardise wages. They will now support any party that comes up with the most workable job creation strategy and promises to “revive” the state’s plywood industry.

A Flourishing Job Hub in Disarray

Haryana’s Yamunanagar, situated on the banks of the river Yamuna, acquired two plywood manufacturing units in the early 1980s.

In the early-to-mid-90s, when agroforestry was being promoted, the plywood industry in Yamunanagar was thriving and by 2014, it had reached its peak, said Chawla. The area alone contributed more than 60% to the country’s plywood market, but the downfall began with demonetisation, followed by GST, he added.

Mohan Lal, 65, has worked for over 30 years in a Yamunanagar plywood factory. Today, the man who was once an expert in cutting plywood, seeks odd jobs at construction sites dressed in a torn shirt and trousers.

Mohan Lal, 65, has worked for over 30 years in a Yamunanagar plywood factory. Today, the man who was once an expert in cutting plywood, seeks odd jobs at construction sites. His income dropped from Rs 16,000 a month before demonetisation, to Rs 3,000-Rs 5,000 now.

Lal and his family used to live comfortably on the Rs 16,000 he earned and there were Sundays and government holidays off. They lived in a basic but comfortable one-bedroom home in the Old Hamida area of Yamunanagar.

Demonetisation sent Lal’s life into a spin. The plywood factory where he worked shut down. The job loss and cash-crunch forced him to relocate his family to a kutcha (makeshift) house in a slum in Sarsawa, Saharanpur--about 28 km from Fawara Chowk. After struggling to find a job in plywood units that struggled to stay afloat, he started working as a daily wage worker. Even a year after demonetisation, he could find only five to seven days’ work a month at a daily wage of Rs 250-Rs 300. His monthly income dropped to between Rs 3,000 and Rs 5,000. His sons live separately; one works as a cleaner at a government school while the other works as a watchman at a night market. His wife is ailing and unable to work.

Yamunanagar has lost its reputation as a destination for job seekers, said Satish Dhiman, president of Pehar, an organisation working for unorganised sector workers. “The government has failed to safeguard the rights of thousands of workers and their families,” he said, denying government claims about the success of employment schemes.

One Unit Shut, Another May Shut Soon: Owner

Ankur Jain, the owner of six plywood manufacturing units in Haryana, claimed that another 40% of Yamunanagar’s plywood factories shut down by March, 2019. He himself employed 129 workers but had to fire more than half of them after demonetisation. This year, he was forced to shut down one of his six units due to increasing losses and may wind up one more. The 49-year-old has two children in college and is “stressed” about affording their tuition fees.

Both demonetisation and hasty implementation of GST have left the plywood industry in a panic, said Neeraj Garg, a chartered accountant and financial advisor to several units.

The fall of the plywood industry was also impacted by the collapse of the construction sector, said Garg. Earlier, material was supplied to Maharashtra, Gujarat, Delhi, Uttar Pradesh and other parts of the country from here. However, demonetisation crippled the construction sector and pulled down demand for plywood by about 40%, he said.

Plywood prices are expected to rise too--before demonetisation, the price of raw wood was Rs 150 per quintal, now it has gone up to Rs 700, said Arshu Mehta, a 46-year-old plywood businessman in Yamunanagar.

Earlier, under the control of the state forest department, plywood factories were issued licenses based on the availability of wood. Between 2011 and 2017, no licenses were issued to open up plywood manufacturing units. However, in 2018, the BJP government opened licensing applications for plywood units without carrying out an inventory of the amount of wood available.

There has been a demand and supply mismatch in the state, since enough poplar and safeda (eucalyptus) trees have not been planted in the last 10 years in Haryana and this has led to a shortage in wood supply and an increase in prices, said Mehta.

Mehta alone had to fire 22 permanent, 43 contract and 50 other labourers from a single unit; production at another unit came down to less than half. Not only have labourers been fired, the ones remaining either received a pay cut or did not get a raise. At Mehta’s factory, labourers earned about Rs 15,000 before demonetisation and some earned another Rs 4,000 for overtime. Now, more than half his workforce have lost their jobs and the ones who are still employed, have received pay cuts and lost out on benefits such as overtime.

To protest against 28% GST, in 2017, more than 1,100 plywood units in the state went on an indefinite strike. They demanded that GST be brought down to 18%, which the government agreed to.

However, Yamunanagar’s plywood industry is yet to recover.

(This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same. This article was originally published on IndiaSpend. Read the original article here.)